Small businesses in the East Midlands face £660 million bill for regulation

25 June 2009

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Small businesses in the East Midlands lose more than £600 million every year due to government red tape, new figures have shown.

Research carried out by the FPB has found that firms in the region spend around £660 million each year complying with legislation.

The figure, drawn up using feedback from FPB members, means entrepreneurs in the East Midlands face the eighth biggest bill in the country for carrying out the paperwork associated with running a small businesses out of a total of 12 regions.

The figure for the area, based on the amount of company time and therefore money spent complying with the rules, includes £149 million spent on health and safety legislation, £170 million spent dealing with paperwork on employment law and £23 million on dismissals and redundancy.

The work associated with staff absences costs £28 million, costs associated with maternity came in at £17 million and the work related to disciplinary issues was worked out at £24 million.

The figures came as no surprise to FPB member Grahame Holbrook, who runs Bramcote Hills Garage in Bramcote and employs around nine people.

Mr Holbrook said his well-established Nottinghamshire firm frequently spent valuable time and money making sure it complies with lengthy employment and health and safety regulations.

He said: "I'm not at all surprised. You spend half your time doing these things and ticking boxes with the VAT, Companies House and accounts, and with us being a service garage we have all these other government departments to deal with too, like the Vehicle Inspectorate.

"You don't sit down and work out the cost of it all because you simply don't have the time but it must cost a lot. A small company just doesn't have the time or financial ability to do it and if you think about small traders and one-man bands, I don't know how they get on."

Samantha Poulton, one of the directors at Buxton firm G & T Motor Spares Ltd which employs five people, agreed. The Derbyshire businesswoman said: "You do spend time on it and there's that much literature to read, just to know you're covered.
"Getting your head round it is often the hardest part."

The not-for-profit FPB is now urging the Government to cut down on red tape for small businesses after its latest Referendum survey on ‘the cost of compliance' found that, nationally, regulation costs the UK's smaller business employers almost £12 billion per year.

The survey found that, on average, small business employers devote 37 hours each month to complying with regulations. The FPB believes that reducing the time and cost of complying with legislation must not be sidelined, particularly as many firms are struggling to survive because of the recession.

The FPB's Policy Representative, Matt Goodman, will attend a meeting of the Better Regulation Executive (BRE) on Friday, 26 June 2009. The meeting follows reports that the Government is not pushing through plans to reduce regulation following its scrapping of ‘regulatory budgets' that had been earmarked for individual departments.

In addition, two committees on regulation announced in April by Peter Mandelson, the Secretary of State for Business, Innovation and Skills (BIS), have still not been set up. Further, in a recent blog on its website, and ahead of the publication of the Treasury's forthcoming consultation on regulating lenders, the BRE said that ‘financial services [are] at the forefront of our issues now'.

"As part of a new department with a broader remit, the BRE must continue to put the smallest businesses at the forefront of its plans to change the culture of bureaucracy in the UK," said Mr Goodman. "Our research shows that complying with red tape remains one of the major cost burdens facing smaller businesses, swallowing up valuable time and money that could be used more profitably elsewhere."

He added: "In addition, at a time when protecting both workers and businesses should be a priority, regulations are increasingly burdensome as businesses take on more staff."

Micro businesses (0 to 9 employees) spend an average of 33 hours per month complying with regulations, small businesses (10 to 49 employees) 48 hours per month and medium-sized companies (50 to 249 employers) 131 hours – equivalent to one full-time member of staff.

Employment law is the costliest bureaucratic burden, costing small businesses £2.4 billion per year. Health and safety administration costs £2.1 billion and tax £1.8 billion per year, according to the FPB's research.

The average time per month spent on employment red tape (dismissals and redundancy, discipline, absence controls and management, parental leave, and holidays) is ten hours. For health and safety, it is eight hours. Business owners spend an average of seven hours each month on tax administration, four on building and property regulations, four on standards, three on environment and waste regulations, and an hour per month on equality and diversity.

Representatives from the BRE have been in discussions with small businesses from across the UK hoping to meet a target of saving £3 billion per year via reducing bureaucracy. While welcoming this engagement, the FPB believes that more must be done in order to meet this target.

The FPB provides a member helpline, a 24-hour legal advice service and Health & Safety and Employment Guides in order to help small businesses to comply with legislation. In addition, the organisation has recently launched an online video advice portal, www.smallbusinesschannel.co.uk, and has joined forces with Cardinus, a subsidiary of THB Group, to provide online health and safety training.

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Small businesses in the East Midlands face £660 million bill for regulation

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